The Drawback to Calculating Real GDP Using Base-Year Prices Is

question 215

Multiple Choice

The drawback to calculating real GDP using base-year prices is that

• A)real GDP in one year is not comparable to real GDP in another year.
• B)relative prices change over time, which is not reflected in base-year prices, and this distorts GDP.
• C)relative prices change over time and these changes are reflected in base-year prices.
• D)quality changes are reflected in base-year prices.
• E)base year prices do not capture changes in production from year to year.

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Definitions:

Thirty Years' War

A devastating conflict in Central Europe between 1618 and 1648, involving many of the great European powers, that was primarily fought over religious and territorial disputes.

Soldiers

Individuals who serve in an army and are specifically trained and equipped to fight on behalf of a state or country in military engagements.

Treaty of Westphalia

The Treaty of Westphalia, signed in 1648, ended the Thirty Years' War in Europe, marking the beginning of the modern state system by recognizing the sovereignty of nations.

Royal Authority

The power and right of a monarch to rule a kingdom or empire, typically involving the exercise of sovereignty, law-making, and governance.